The bills come due

Published 1:00 am, Tuesday, November 24, 2009

The state Legislature, in all its bluster and inaction, might not be all that troubled by New York's $3.2 billion budget deficit. Others are quite troubled, however — beginning with Moody's Investor Service.

It issued a report last week that would have been a true turning point in a more responsibly governed state. Either New York gets out of the red — and without resorting to the usual one-shots and other gimmicks ­­— or its bond rating is very likely to be downgraded from its current status of Aa3, which is the lower rating for what remain high-grade bonds. That means, of course, that it will be even more expensive for the state to borrow money for the large projects that can't practically be paid for from the general fund. As Governor Paterson notes in a letter to all 212 legislators, funds that in better times could pay for government services instead will go to repaying the investors who hold New York's bonds.

New York could become that much more like California, Moody's warns. There, a mismanaged fiscal crisis prompted Moody's and the other ratings services to reduce the state's bond rating to just above junk status.

Listen, then, to Moody's warning to New York in that context:

"If there is no action taken by the state to close the gap, or if action is taken but is largely one-time in nature (therefore increasing the structural imbalance in the out years), and revenue collections in January are close to or below state projections, the state's situation at that time would likely not be consistent with a Aa3 rating and stable outlook."

Governor Paterson, meanwhile, means it when he says the state is going broke. And he could hardly be clearer about the consequences. Not only will the state's bond rating and credit rating go down if the deficit isn't reduced, but layoffs of state workers and delays in paying them would be all but inevitable. So, too, would delays in payments to school districts and to local governments.

A similar warning comes from state Comptroller Thomas DiNapoli. He's taking note of the bills the state needs to pay, even if the Legislature isn't so worried about them. They include $2.5 billion in school property tax relief and $1.6 billion in aid to school districts.

New York's general fund is likely to have its own shortfall of some $1.4 billion in just a few weeks. That would leave state government having to borrow from a special fund that's used to take care of bills it otherwise would be temporarily unable to pay.

It's a sloppy way of running the business of government. And people beyond Albany are noticing it.